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New enforcement option for serious corporate crimes by Australian companies

The Australian government is considering a new model for responding to fraud, false accounting and foreign bribery. A consultation paper released on 31 March 2017 puts forward a possible deferred prosecution agreement (DPA) scheme for dealing with corporate crime. Submissions on the model are invited by 1 May 2017.

Background

A DPA is an agreement whereby the prosecutor agrees not to seek a Court prosecution (and conviction) in exchange for the company agreeing to introduce agreed remedial measures and pay an agreed fine. One of the key issues is whether such an arrangement should be subject to Court approval and, if so, whether that approval should be more of a “rubber stamp” or a searching examination of the proposal.

The DPA consultation paper is part of a welcome range of measures taken by the Australian government to strengthen its ability to prevent, detect and respond to white-collar crime. Last year the government introduced new false accounting laws. It is also working to enhance whistleblower protections and the Senate is inquiring into Australia’s foreign bribery laws. In 2016, the government invited submissions on the merits of introducing a DPA scheme, the likes of which have been successfully implemented in the United States and the United Kingdom. A range of stakeholders endorsed this option and the government now seeks comment on a specific model.

Aims of a DPA scheme

The aim of a DPA scheme is to improve accountability of Australian companies for serious corporate crime. DPAs would enhance detection by incentivising businesses to volunteer information about criminal conduct to authorities. This enforcement tool would serve the dual purposes of punishing companies for wrongdoing and providing a means of redress for anyone affected. DPAs provide a mechanism to resolve lengthy prosecutions at an early stage and consequently reduce otherwise substantial expenses. A standard term of a DPA is requiring companies to implement systemic changes to prevent recurrences of offences and so DPAs have the added benefit of improving corporate culture and compliance.

The proposed model

A DPA facilitates agreement by the authorities to defer prosecution of a criminal offence in return for the company complying with certain conditions. The conditions would be flexible but typically would include the company making a formal admission of guilt, cooperating with any investigation, paying financial penalties, rectifying any harm suffered and implementing measures to prevent reoccurrences.

The company would be subject to ongoing monitoring to ensure compliance with the DPA. If the company failed to meet its obligations, it may have an opportunity to resolve the breach or prosecutors might renegotiate the terms. If those options were ineffective, a retired judge or a court would determine whether the breach was material and, if so, authorities may launch criminal proceedings.

There are limitations on when DPAs would be available. The consultation paper suggests they only apply to certain serious corporate crimes including fraud, false accounting, and foreign bribery. Tax, cartel and environmental offences are not included in the current proposal. DPAs are also only available to companies and not individuals. Indeed, some of the information provided by a company may be used to identify and prosecute individuals.

In the US, DPAs are not subject to court approval as they are in the UK. The Australian model contemplates review of a DPA by a retired judge and approval if it is in the interests of justice and the terms are fair, reasonable and proportionate. If approved, the DPA would be made publicly available. If this proposed publication comes to fruition, a database of approved DPAs would provide guidance to other companies about what their internal procedures should look like. The proposed DPA scheme stands to benefit corporate Australia broadly, rather than just the companies directly involved in the process.

What do you need to know?

A DPA is a proposed enforcement tool that allows deferred prosecutions for serious corporate crimes where an agreement between the corporate wrongdoers and prosecutors is reached.

DPAs are not currently available in Australia.

This consultation process demonstrates the Australian government’s commitment to strengthening its fight against corporate crime by Australian companies. This is a timely reminder to ensure your corporate procedures and practices meet best practice.

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